Corning Incorporated Polishes Another Solid Quarter

Shares of Corning Incorporated(NYSE: GLW) fell around 1% after the glass technologist released second-quarter 2016 results Wednesday morning, but that doesn't mean investors shouldn't be pleased with its performance.

Display-technologies segment core revenue fell 9% year over year, to $880 million, and display core earnings dropped 18%, to $237 million, both in line with expectations as panel makers increased utilization to meet demand for the second-half retail season.

LCD glass price declines continued to moderate.

Optical-communications segment sales grew 28% sequentially and fell 2% year over year, to $782 million, exceeding expectations. Optical core earnings more than tripled sequentially and fell 5% year over year, to $86 million, driven by strong demand for fiber-to-the-home and data-center solutions.

Environmental technologies revenue was in line with expectations, remaining roughly flat from last year's Q3 at $259 million, as high demand for automotive light-duty substrates was offset by softness in heavy-duty truck demand in both North America and China. Environmental net income remained flat sequentially and declined 20% year over year, to $37 million.

Specialty-materials sales grew 17% sequentially but fell 2% year over year, to $266 million, below expectations, given lower smartphone and tablet demand in the consumer-electronics industry. Specialty-materials core earnings increased 50% sequentially and 9% year over year, however, to $48 million, driven by high-margin sales of Gorilla Glass 4.

Life-sciences revenue climbed 5% sequentially and 2% year over year, to $215 million, while life-sciences core earnings increased 17% and remained flat from the same year-ago period, at $21 million, in line with expectations for low-single-digit year-over-year growth.

The strategic realignment of Dow Corning was completed on May 31, adding $4.8 billion in cash and a 40% ownership stake in the newly formed Hemlock Semiconductor entity.

Gorilla Glass 5 was unveiled subsequent to the end of the quarter, further improving on the Gorilla Glass line's drop performance over competitive glasses. Gorilla Glass 5 is expected to be on product models from "leading global brands" later this year, and in lab tests it survives up to 80% of the time when dropped face-down from 1.6 meters onto rough surfaces.

What management had to say

Corning CEO Wendell Weeks stated:

As a reminder regarding that capital-allocation framework, late last year Corning pledged toreturn more than $10 billionto shareholders through dividends and repurchases, and to invest $10 billion in research, development, and engineering through 2019.

Looking forward

For the current quarter, Corning continues to expect its display segment to benefit from 8% to 10% growth in the retail glass market, with the overall glass market up in the mid-single-digits in terms of area. Optical sales should increase roughly 10% from last year's third quarter, driven by continued growth in fiber to the home and data centers. Meanwhile, specialty materials should be roughly consistent or down slightly from last year's third quarter, and life sciences should continue to increase sales in the low single digits on a year-over-year basis.On a consolidated basis, Corning expects gross margin to remain roughly consistent with Q2 at around 43%, expanding from last year on higher sales from both display and optical.

Apart from weakness in the mobile industry holding back specialty-materials sales, there were no big surprises in Corning's latest quarter. And to its credit, though Corning's share-price declines after the earnings report might seem to indicate the market's displeasure, investors can take solace knowing Corning stock set a fresh 52-week high leading into the report. As long as Corning continues to foster innovation, pursue responsible capital stewardship, and reward shareholders through ambitious capital returns, I think investors should be happy with where it sits today.

A secret billion-dollar stock opportunity The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.